How did BNED's operating profit surge in Q3 2025 despite lower gross profit?

Barnes & Noble Education (BNED) experienced a notable increase in operating profit in Q3 2025, despite a slight decline in gross profit, due to strategic initiatives and cost management efforts.

1. **Strategic Initiatives**: BNED's growth was driven by strategic initiatives, particularly the success of its BNC First Day® programs. These programs contributed significantly to the overall financial performance, with a 21% year-over-year revenue growth in Q3 2025. The First Day® Complete program, which provides students with required course materials at below market rates, has seen rapid adoption, leading to a typical 80% increase in course material revenue and a 100% uplift in gross profit for BNED.
2. **Cost Management**: The company reported a 29.8% increase in adjusted EBITDA, reaching $27.4 million, supported by cost-saving initiatives and reduced SG&A expenses. This indicates that BNED has been successful in managing its costs effectively, which has contributed to the improvement in operating profit.
3. **Revenue Growth**: BNED's revenue increased by 2.1% to $466.3 million in Q3 2025, primarily driven by the growth in the BNC First Day® programs. This increase in revenue, despite the lower gross profit, has contributed to the overall profitability of the company.
4. **Financial Turnaround**: BNED's financial performance showed a significant turnaround from the previous year, with a net income of $7.1 million in Q3 2025 compared to a loss of $9.9 million in the same period last year. This turnaround is a result of effective operational efficiencies and strategic investments.

In conclusion, BNED's operating profit surge in Q3 2025 can be attributed to the success of its strategic initiatives, cost management efforts, and revenue growth. Despite a slight decline in gross profit, these factors collectively contributed to the company's improved financial performance.